Redesign the proposition
One part of the answer will be to rethink the nature of the product. For example, research suggests millennials overwhelmingly favour usage-based insurance, where they only pay for cover as they need it. Digital start-ups such as Cuvva, Bymiles, and Trov are already offering products that accommodate this desire with pay-as-you-go insurance for cars and personal belongings.
Another option is to focus on millennials’ willingness to share and engage.
Research suggests that millennials are more willing than other generations to share their personal data, especially if they believe they are getting something in return. This opens the door to personalisation and customisation and could enable brokers armed with data to drive down costs and provide a more competitive offering with cover that much more closely reflects individual risk.
Examples could include using telematics in motor, taking advantage of the fact that more than eight in 10 millennials would change their driving habits to obtain cheaper car insurance.
Similarly, health insurers could leverage millennials’ passion for health and wellness by analysing data obtained from wearable fitness devices to refine their policies.
Reimagine the experience
Acquiring these customers will require new thinking. Firstly, millennials are significantly more likely to rely on recommendations – whether personal or online – when making purchases, which requires a new approach to marketing and advertising and places further importance on customer service.
During the onboarding stage and thereafter, the customer experience is crucial. Millennial customers expect to be able to make purchases and obtain service through the channel of their choice, whenever they want. They are more than twice as likely to buy insurance online – so while there will still be a role for intermediaries with expertise, they will need to find new ways to communicate with their customers, for example through chatbots, social media and mobile apps. Too many incumbent financial service providers are prepared to sell online only to ask policyholders to print out paperwork and exchange documents by post. Regulatory hurdles such as “know-your-customer” don’t have to add bureaucracy anymore given the availability of technologies such as facial recognition (which could also slash insurers’ fraud costs).
And when policyholders need help, tools such as apps that upload documents, chat bots that answer queries quickly and online claims handling will become just table stakes for insurers and brokers.
Trust is a related issue. Millennials’ misgivings about financial services companies require brokers to find new ways to engage, to prove their credentials. Start-ups such as Lemonade and Friendsurance, are attempting to do this with a new model for insurance that does not pitch insurer against policyholder. For example, the latter is built on a peer-to-peer model that matches people with similar needs and rewards those who don’t make claims. These ideas may represent a breakthrough in a sector where all policyholders, millennial or not, are far from sticky.
Remember the future
Finally, for insurers and brokers wondering if the effort to acquire and retain millennials’ business is worth it, bear in mind that these will be the customers of tomorrow as well as today. By 2020, millennials will account for 35% of the workforce, more than any other generation. Acquiring their custom early will pay dividends.
Innovation will be important, but imitation has a role too. Fast followers in financial services are already adopting the tactics of FinTech and InsurTech businesses – or collaborating with them. The prize is simply too large to ignore.
This article was published by Insurance Age, 6th November 2018.
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